I think Aurang specifically notes he's talking about sexual encounters and not genetic modification. Now he may be wrong, but I think his belief regarding his own damnation is clear.
Of course, how a scientifically advanced civilization not only manages to discover its damnation, but also the specific reasoning, is questionable. [Which is part of why I doubt the Inverse Fire's accuracy....but then I also doubt the Judging Eye so maybe doubting is just my jam.]
But how does that make the IF seem false? To me it makes it all the more likely. The Inchoroi peered ever deeper into the fabric of the World until they tore it apart, inadvertently creating the Inverse Fire, which showed them the truth of their Damnation. It did not show them why they were Damned -- all of that is inference (and mostly quite logical on the part of the Inchoroi, really). That's what drove them to their xenocidal rampage across the universe, trying to find the Special Place where shit actually mattered (Earwa). The idea that it's just some "goad" doesn't really fit in for me. What's the goad? All it does is reveal how bad Damnation actually is, to the point that it psychologically scars someone enough that they will do ANYTHING to avoid it. In the Inchoroi's case, they're already irrevocably Damned. It's part of their nature. They happened to be one of countless ensouled (sentient) beings that evolved on a planet that wasn't Earwa (the one place in the universe where subjectivity can override reality, and thus sorcery), and so they had no way of redemption. That's why Earwa is special. The Gods are anthropomorphic, not because humans are special, but because whatever sentient race dominates Earwa also determines what the nature of the Outside is. Thus the quotes about the Outside being a reflection of the World (a.k.a. Earwa). Thus the motivation for wiping out the population of said planet until the dominant noosphere no longer is dictated by primitve human ideologies. Earwa, to me, is a sort of lynchpin between the Universe and the Outside. It's the point where the two meet. That's why the Gods only care about acquiring the favor of Earwan souls -- and thus they make efforts to keep them reverent and worshiping (sending prophets like Inri, for example -- afterall, the Tusk was a falsehood by the Inchoroi, and so the Gods needed to send a Latter Prophet to set things straight).
Within that context, the IF being total bullshit just seems very...I don't know, pointlessly misleading. If the IF is false, then what's the truth? Is Damnation not as shitty as expected? I mean, the themes of the entire series kinda rest on this conceit. It's like one of the major points of the series to me; that an objectively-true anthropomorphic religion is inherently harmful to everything non-anthropomorphic.
I've said this before, but I honestly think the series makes a lot more sense when you look at it from the perspective of Bakker being a religiously raised child that got all intellectual and rebellious in his teenage years and tried to turn everything on its head (which, for someone like me, is very relatable, even though my actual upbringing was only mildly religious). He's challenging these long-held -- and clearly flawed -- ideas of Abrahamic religions, on a number of levels.
Like I've said in other posts: What if Christianity was in some form true, but Jesus (Inri) was only sent to Earth? What happens to all of those other sentient beings in the universe that never even know such a moral system exists, let alone those who are fundamentally, biologically opposed to it, because they evolved that way out of their control, like the Inchoroi?